International Media Watch of news headlines and current affairs reports about Romania

Friday, March 30, 2012

Romanian Central Bank to Cut Main Rate Fourth Time, Survey Shows

Romania’s central bank probably will lower its main interest rate to a record low for a fourth consecutive meeting as inflation slows and the economy threatens to slip into a second recession.

The Banca Nationala a Romaniei will cut its monetary policy rate to 5.25 percent from 5.5 percent after dropping it a quarter of a percentage point in each of the past three sessions, according to the median estimate in a Bloomberg survey of 18 economists. Thirteen predicted the quarter-point cut and five forecast no change. A decision is expected after 11 a.m. in Bucharest today and a briefing start at 3:30 p.m.

Romanian central bankers have been cutting borrowing costs since November to shore up faltering growth and fend off the effect of the European Union’s debt crisis, which reduced demand for exports from eastern Europe’s main trading partners.

“We believe that real interest rates are too high for the feeble economic outlook and a too-restrictive monetary policy will depress domestic demand, the main growth driver after exports were hit by falling orders from the EU,” UniCredit Romania Chief Economist Dan Bucsa said in a note to clients yesterday. “We believe that this easing cycle should take the rate below 5 percent, but the National Bank is unlikely to cut further if and when headline inflation rises towards 4 percent.”

Romania’s economy may contract for a second quarter at the end of March and enter a technical recession for a second time in two years after cold weather disrupted output, Finance Minister Bogdan Dragoi said on March 9.GDP Forecast

Gross domestic product may grow 1.5 percent in 2012 from a year earlier, when the country exited its worst recession on record, according to government forecasts.

The inflation rate dropped to 2.6 percent, a post-communism low, in February from 2.7 percent in January, less than economists estimated, as heavy snow and freezing temperatures disrupted transport and supplies, limiting price decreases, the National Statistics Institute said on March 12.

The central bank raised its 2012 inflation forecast on Feb. 7 to 3.2 percent this year, within its target range, compared with a November forecast of 3 percent, because of potentially higher food and energy prices, Governor Mugur Isarescu.

The bank met its inflation target for the first time in five years in 2011, with the rate falling to a record-low 3.14 percent in December. The target range for this year is the same as last year at between 2 percent and 4 percent.